The Volkswagen trial

What did he know?

The carmaker's chairman and former boss makes a star appearance

KLAUS VOLKERT and Klaus-Joachim Gebauer, the two defendants in Germany's biggest corporate trial in years, are no longer its focus. They have already admitted their part in a scandal that provided leisure travel, prostitutes, jobs for girlfriends and other perks at the expense of Volkswagen (VW), where they were employed respectively as head of the workers' council and a personnel manager.

The true focus of the trial, since it began on November 15th, has been Ferdinand Piëch, chief executive of VW from 1993 until 2002 and now its chairman. How much did he know of the goings on, which were being funded from an account run by Peter Hartz, his fellow board member for personnel, before they hit the headlines in 2005? Mr Piëch has always professed ignorance. Mr Hartz, in his own snappy trial a year ago, said the buck stopped with him, and took the rap accordingly: two years' suspended sentence and a fine of €576,000 ($750,000). Two witnesses so far have supported his account. But others insist that Mr Piëch knew about, and discussed, how to keep the workforce on-side by giving special treatment to workers'-council members, especially Mr Volkert.

Mr Piëch had his day in court on January 9th. He painted himself as a man concerned with the big picture, busy trying to protect jobs and control the cost of developing new cars. How could he have the time to keep track of an obscure social-affairs account run by Mr Hartz? Lawyers seeking to get Mr Piëch to admit the slightest knowledge of the shenanigans were disappointed. Evidence that he did might mitigate the sentences of Mr Volkert and Mr Gebauer, but so far nothing conclusive has turned up. Mr Piëch questioned the authenticity of a potentially damning letter supposedly sent to him in 2003 by a disgruntled employee in order to alert him to money lavished on supervisory-board and workers'-council members.

Why is this trial important? Because it calls to account an opaque system of corporate governance—known as the System-VW—which should have been dismantled years ago. VW was long protected from private shareholders by a special law, passed in 1960, which the European Court ordered Germany to abolish last October. For years VW prided itself on excellent industrial relations. But the scandal suggests that those depended on a secret entente between management and a handful of workers' representatives. Shareholders and the workforce were being hoodwinked, or at best denied their full rights. The unreconstructed Mr Hartz even argued in court on December 20th that Mr Volkert, by interceding with the workforce on behalf of management, had “saved the firm billions”.

A VW spokesman concedes that “something clearly went off the rails”. But he is surprised that the VW trial has aroused so much indignation compared with corporate Germany's other big corruption scandal, at Siemens, which seems likely to keep the courts busy for a while yet. Peter Löscher, the head of Siemens, put managers and former managers on notice in a Christmas letter that corruption would be pursued exhaustively, and compensation sought. Claims of ignorance or altruism, he said, would be no excuse.